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Ford shifting all U.S. small-car production to Mexico

by Greg Gardner and Brent Snavely, Detroit Free Press

CEO Mark Fields told investors the move is part of plans to make production simpler and less expensive

Ford is shifting all North American small-car production from
the U.S. to Mexico, CEO Mark Fields told investors today in Dearborn,
even though its plans to invest in Mexico have become a lightening rod
for controversy in this year's presidential election.

"Over the
next two to three years, we will have migrated all of our small-car
production to Mexico and out of the United States," Fields said.

Ford
isn't the first automaker move small car production out of the U.S. as
Mexico has become a mecca for new automotive industry investment and has
surpassed Canada in annual automotive production.

Fiat Chrysler
Automobiles said earlier this year it will end production of all cars in
the U.S. by the end of this year as it discontinues production of
the Dodge Dart in Belvidere, Ill. and the Chrysler 200 in Sterling
Heights, Michigan.

The industry has known for decades that domestic manufacturers struggle to make a profit on small cars in the U.S.

In
recent years, automakers that include General Motors, Honda, Hyundai,
Nissan, Mazda, Toyota and Volkswagen have all announced plans to either
expand existing plants or build new ones in Mexico. Fiat Chrysler
Automobiles also has said it is considering an expansion of its
production there.

Mexico has seen a 40% increase in auto jobs
since 2008 to 675,000 last year while the U.S. saw only a 15% increase
in the same period to more than 900,000, according to the Center for
Automotive Research in Ann Arbor.

While the North American Free
Trade Agreement has been a factor for automotive investment in Mexico
there are other factors as well. Mexico has trade agreements with 44
other countries, a robust rail and shipping infrastructure, lower wages
and now workforce that has proven it can make high-quality cars.

Ford's
decision to shift the assembly of small cars to Mexico can reduce costs
to a point. But some of these cars are over-engineered.

For
example, Fields said the current Ford Focus can be ordered in 300
different configurations of options and colors. Ford wants to reduce
that to 30, which will make the production process simpler and less
expensive.

It's
an ironic twist for Ford's plant in Wayne, Michigan. Ford spent $550
million in 2010 to convert from the aging plant from a big SUV factory
to one that could build the efficient Focus compact car.

The
impact on Ford's U.S. employment will be minimal in the near-term. Ford
already builds the Fiesta subcompact and the Fusion mid-size sedan in
Mexico. There is an expectation that Ford will build a new Ranger
mid-size pickup truck in Wayne and possibly a new Bronco compact
sport-utility.

The automaker also still will make the Ford Mustang
at its plant in Flat Rock, Michigan and will begin making the full-size
Lincoln Continental there later this year. It also makes the full-size
Ford Taurus in Chicago.

Still, Ford is reassessing much of its
business to prepare for a future where it needs to make cars for new
modes of transport, to generate money from shared use, all without
jeopardizing profits still generated by many of its cars and trucks.

Ford's
decision to build a new plant in Mexico has made it a target for
Republican Presidential candidate Donald Trump who said in April "these
ridiculous, job-crushing transactions will not happen when I am
president."

UAW President Dennis Williams also has repeatedly blasted Ford and other automakers for investing so much money in Mexico.

There
is no reason, mathematically, to go ahead and run to countries like
Mexico, Thailand and Taiwan," Williams said earlier this year. "We all
recognize there is a huge problem in Mexico. So we have to address it as
a nation. The UAW cannot do it alone. We are not naive."

Unifor, the Canadian union that represents automakers, also is struggling to hold onto its automotive industry.
It is currently in contract negotiations with the Detroit Three on a
contract that expires on Monday and is worried that three plants could
close in the coming years if automakers refuse to commit to new
investments.

Ford has said it continues to invest heavily in its
U.S. plants and isn't cutting jobs here. Last fall, the automaker made a
commitment to invest $9 billion in U.S. plants and create or retains
more than 8,500 jobs as part of a new four-year contract with the UAW.
Of that, $4.8 billion goes to 11 facilities in Michigan.

The
future of smaller cars in the U.S. may depend on the ability to
electrify their powertrains and introduce them to ride-sharing fleets
where they can generate revenue from fares paid by multiple riders.

Ford
also reiterated its commitment to developing an autonomous vehicle by
2021 for use in a ride-hailing service. The company believes that
autonomous vehicles could account for up to 20% of vehicle sales by
2030.

Ford continues to present its corporate strategy to more
than 100 analyst and investors throughout the day. The meeting comes as
the U.S. auto industry's six-year recovery is cooling, while the U.K.'s
exit from the European Union has presented a new challenge to Ford's
rebound in Europe.

Investors didn't reward Ford or other U.S. automakers when they posted
record profits last year and early this year. Now that U.S. sales are
leveling off Wall Street is even less enthusiastic about the
sector. Ford shares have fallen 12% from the beginning of the year from
$14.09 to Tuesday's closing price of $12.38.

Fields spent the
first half of his 45-minute presentation assuring analysts that Ford's
core business remains strong, especially in its most profitable segments
such as full-size pickup trucks, commercial vans and its resurgent
Lincoln luxury brand.

But he also said the company must respond to a global shift away from
personal vehicle ownership to one in which personal ownership will be
challenged by on-demand shared mobility.

"This is very different
thinking for us," Fields said. "For most of our history we have thought
about the thing and how many of the things we have sold."

In exploring how a traditional manufacturer can profit in a market
where the vehicle becomes a service platform, Fields said the first
question he and fellow executives had to define is "What’s our point of
view on autonomy?"

"We see huge social economic and environmental
benefits. We’re focused on usage where miles traveled are as important
as the number of units sold," he said. "Autonomous vehicles will account
for one of every 10 miles traveled by 2030, and will grow from 5% of
all vehicles sold in U.S. in 2025 to 20% in 2030."